Here’s What Analysts Said After Tesla’s Price Cut Announcement

Shares of electric auto maker
Tesla
(ticker: TLSA) fell once again Thursday, a day after the company reported quarterly delivery numbers and a price cut that disappointed investors.

Tesla stock closed Thursday down 3% to near $300, putting it down nearly 10% in 2019.

Here’s a roundup of some of the analyst comments published since Wednesday’s announcement. FactSet’s average analyst estimate for the stock is near $337, and the latest comments covered a range of interpretations of the new company data.

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• Macquarie’s Maynard Um maintained a $430 target price and an Outperform rating. He raised fourth-quarter revenue and earnings estimates on Model 3 production numbers that were higher than he had projected.

“Concerns over near-term U.S. demand [are] likely to linger until international demand proves itself,” Um wrote, saying that the first quarter essentially bridges a U.S. tax credit that is phasing out and the start of expected growth as the company ships more cars to foreign markets.

We “believe expectations have reset lower and think a series of profitable earnings/cash flow quarters can drive shares higher,” he wrote.

•
Deutsche Bank
’s Emmanuel Rosner maintained a Hold rating and a $375 price target. While he sees Tesla’s battery design and cost as “industry-leading,” competition in other areas could prove to be a longer-term challenge.

“While we see competition coming, it will primarily be at the premium end until 2020/21,” he wrote. “Therefore, we think Model 3 remains in a ‘league of its own’ at least through mid-2020.”

“Longer term, once Tesla fills its Model 3 pipeline, we worry the stock could derate lower if there are signs sales are plateauing as more competition emerges or if Tesla’s autonomous technology is perceived by investors as trailing behind competitors,” Rosner wrote.

• Canaccord Genuity analyst Jed Dorsheimer maintained a Hold rating and a $323 price target. His current estimates are under review, he wrote.

“The two big concerns that investors will now have is for a potential [first-quarter] demand air pocket following what likely was a demand pull-forward [fourth quarter] given the tax credit reduction from $7,500 to $3,750 on January 1, 2019, and significant questions regarding just how fast Model 3 production capacity can be increased,” Dorsheimer wrote.

• Nomura Instinet’s Romit Shah maintained a $300 target price and a Neutral rating, while lowering projected profits based on the announced price cuts.

“Historical precedent suggests that a subsidy reduction will result in at least a short-term headwind to regional demand, though this price cut could soften the blow,” Shah wrote.

•
JP Morgan
’s Ryan Brinkman, who has an Underweight rating on the stock, lowered his price target by $5 to $220, while lowering fourth-quarter estimates.

“The perceived need on Tesla’s part to lower prices suggests to us potentially softer underlying demand, and carries negative implications for the ability to earn the firm’s targeted strong 25% gross margin on the already lower priced Model 3, which has been a key source of our conservatism,” Brinkman wrote.

• Jessica Caldwell, Edmunds’ executive director of industry analysis, said in a statement, “while there’s still a certain cool factor to owning a Tesla, price is still the most important consideration for most car buyers and the tax credit phase out means the price tag of a Tesla went up by thousands of dollars overnight.”

The company had to soften the impact of the tax credit reduction on consumers, particularly amid softening demand, she added.

“It sounds more alarming since it’s happening to Tesla, but finding that perfect balance between production, demand and price is an age-old problem for all auto makers,” Caldwell wrote.

“Entering into an uncertain demand environment, which is subject to consumer spending and macro/tariff related concerns, we are cautious of holding names that have a significant amount of leverage and lack of cash flow,” wrote Gill. “The combination of several factors including declining volume, lower margins, debt repayment, plus high valuation, puts Tesla in a uniquely vulnerable position.”

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